Pankaj Solanki, born and raised in Indore, decided to pursue his aspirations by dropping out of college at a young age. The investment advising landscape has long piqued his interest. After extensive research and development based on his sales and communication talents, he decided to start a franchising firm there. He intends to make Business Bazaar the world’s largest and most effective franchising company, drawing on his ten years of experience in finance, advising, and sales.
Franchising has been attracting a lot of people since the 21st century. The franchising industry in India has recorded a growth rate of around 30–35% over the last four to five years. Presently, the franchising sector contributes more than 2% to the Indian GDP. According to estimations, it is expected to contribute around 4% by 2022. Franchising is a gateway for new entrepreneurs who can learn how to start and operate their businesses and grow and sustain them in the market. However, selecting the best franchise can be a challenging task. According to estimates, there are more than 1.7 lakh franchisees currently operating in India, and choosing the right franchise out of the many available options is difficult.
How to select the right franchise
A good franchise is said to be one where the franchisor considers the franchisees as partners and takes care of them just like he takes care of his own business. However, there are various other points that an investor must pay attention to before selecting the right franchise.
Small business or franchise?
The first decision that an entrepreneur should make is whether they want to be a franchisee or a small business owner. They should first have clarity on this. Small business owners have absolute freedom in making decisions and face no problems. In contrast, in the case of a franchise outlet, there is a very comfortable environment. Everything goes systematically with the franchise brand’s overall requirements and guidelines. For those new to the business world, a franchise is a highly recommended strategy because it allows an entrepreneur to learn more and acquire experience about the business world’s internal workings with the franchisor’s support, and all this with minimum risk.
Market Conditions
Before researching franchise opportunities, it is necessary to study the market and understand its conditions. You first need to have an in-depth analysis of the industries that are currently ruling the market or are growing at a rapid rate. Doing this would help in selecting a franchise that has not only high potential but also long-term growth opportunities. After identifying critical markets, prepare a list of franchises with which you want to begin your business. Good market research is the key to a successful business plan, and understanding the market will help you choose a franchise that will drive significant profits. Not conducting proper research about the market conditions increases the risk of failure and might even lead to huge losses when selecting a franchise.
The Amount of Fixed Capital
Most franchises need a certain amount of fixed capital to start the business, known as fixed capital. This amount covers the costs for equipment, training, advertising, supplies, and software, in some instances, that are needed to start the franchise. This amount is different for every franchise, as franchise costs generally vary greatly depending on the industry and specific business model. For instance, an online or service franchise would need a lot less capital outlay than a franchise in the manufacturing or F & B industry.
Another essential thing to note is that franchisees must clearly define their investment limit before deciding to take up a franchise opportunity.
Franchisor Objectives and Information
The next important step is to connect with the franchisor and clear all your doubts about the ROI, P&L, and growth plan of the franchisor, freedom of operation, and responsibilities as a franchisee. Understanding the terms of the agreement before you begin with the franchise business is essential. Make sure you can connect with them to understand everything about their mission and vision clearly. The franchisor and the franchisee must be on the same page to make a successful and profit-driven deal. This ensures that there are no conflicts in the future between the franchisor and the franchisee. Any difference in values and objectives could pave the way to an unsuccessful partnership in the long run and create further problems.
Franchise reputation
While selecting a franchise, one should investigate the reputation and take feedback from people who are already involved with the franchise in some way. To better understand the franchise, you can ask about details like the franchisor’s support system, licensing fees, and any other exclusive benefits that the franchisor might be offering. It is always good to refer to a franchise’s reviews before choosing it. Similarly, it is always a good idea to learn about a franchise from the people who currently work with it to receive internal feedback on how the franchise operates.
A franchise has proven to be a very successful formula for growth, provides the opportunity to run a business within an established brand name, and has a lower risk than starting your own venture. Examples of successful franchises include Subway, which has more than 45,000 franchise units, and McDonald’s, which has more than 38,000 franchises worldwide. Some of the world’s largest businesses have quickly used franchising to widen their reach. It has now become an integral part of their business growth strategy.
Precisely speaking, for a franchise buyer, selecting a franchise largely depends on what their criteria and objectives are. There are some things that a franchisee should decide even before they start looking at franchise opportunities. They must first clearly understand their goals, objectives, strengths, desired business area, and level of involvement in daily operations. Also, how much money are they willing to invest in the franchise? The franchise is way more likely to succeed in their endeavors if they know what they are looking for and the steps they must take to achieve it.